Transport Airlines

How EasyJet’s CEO Carolyn McCall Proved Her Critics Wrong

May 30, 2014 10:08 am

Skift Take

The airline industry needs more McCalls.

— Jason Clampet

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Reuters

EasyJet CEO Carolyn McCall. Reuters


When Carolyn McCall took the top job at Britain’s easyJet, the abrasive boss of rival low-cost airline Ryanair attempted to write her off as “some old media luvvie”.

Almost four years later, Michael O’Leary is having to play catch-up, emulating some of the more customer-friendly strategies that McCall, a former newspaper group boss, has brought to easyJet’s bright orange brand.

“She’s done a great job at easyJet,” the Irishman said in a one-line statement when asked for comment on his rival, one of only four women running a FTSE 100 company.

Since becoming chief executive in July 2010, McCall has overseen an almost fourfold rise in the share price and a more than doubling in profit at Europe’s second-largest low-cost carrier behind Ryanair. And she doesn’t intend to stop there.

“There’s so much more to do,” 52-year old McCall told Reuters. “I can see myself continuing to work at easyJet for quite a long time.”

Shareholders investing 100 pounds ($170) in easyJet and reinvesting dividends from the beginning of 2011 would have a holding now worth around 450 pounds, compared with the 208 pounds they would have from Ryanair and the 136 pounds from British Airways owner IAG, according to Thomson Reuters data.

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“She’s been very disciplined about how she’s gone about that growth. It’s not about sticking flags in maps. It’s about being ruthless – does this route work or doesn’t it?,” Trevor Green, the head of institutional equities at Aviva Investors, one of easyJet’s twenty-biggest shareholders, said.

“I think she’s got a model which is working and keeping going with that model will continue to be a success.”

Many analysts seem to agree. Even after the 27 percent rise in easyJet’s shares over the last twelve months, of the 25 who cover the stock, 14 rate it a “strong buy” or “buy” compared with nine who rate it a “hold”, Thomson Reuters data shows.

Competitive Edge

McCall’s next step is to expand in France and Germany, where market penetration for low-cost airlines is substantially lower than in Britain, while keeping a lid on costs to continue grabbing market share from higher-cost rivals.

In France she plans to address regional demand for both domestic and international flights, while in Germany, the airline and its rivals are hoping to capitalize on the troubles of Air Berlin, the country’s no.2 airline.

One of McCall’s successes so far has been to steal more lucrative business customers from British Airways, Air France-KLM and Lufthansa, Europe’s traditional airlines, by introducing allocated seating and improving punctuality.

A 5 a.m. trip to Gatwick Airport in her early days as boss, where she asked staff what needed to change to make the airline run on time, helped reverse a reputation for delays.

“There’s a steely competitive edge to her and she’s very determined to win,” said Gatwick Chief Executive Stewart Wingate.

Cost-cutting is another essential ingredient. An easyJet team recently went to Alaska to find a cheaper supplier for de-icing, while the airline is also trialling flying robots to cut the time it takes to check planes hit by lightening.

“The amazing thing about easyJet, having worked in another sector, is that it’s completely inbuilt in the psyche of every person in the company that you are constantly looking for efficiency,” said McCall, who lives and breathes the airline’s no-frills policy, even staying in budget Travelodge hotels on business.

As well the media sector, McCall has experience on the boards of retailers Tesco and New Look and will join British luxury brand Burberry as a non-executive director later this year.

easyJet is banking on the 135 fuel-efficient planes it has ordered to save money in future and is also in consultations about turning one of Gatwick’s two terminals into a mainly easyJet-only zone.

“I think in five years time, there’s no question that Europe will be about low-fares airlines,” McCall said.

Before easyJet, she worked at the loss-making left-leaning Guardian newspaper, climbing the ranks from research planner to chief executive of the overall Guardian Media Group over 24 years.

After fronting a bold and costly redesign of the paper in 2005, McCall took much of the flack for cuts to staff salaries and numbers, and clashed with unions over her own pay.

“She’s not in any way a pushover,” said one of her former colleagues. “She’s a good negotiator and she deals well with big personalities, big egos”.

One such personality is Stelios Haji-Ioannou the businessman who founded easyJet in 1995 and gate crashed the low-cost European airline scene pioneered by Ryanair in the late 1980s.

Stelios, as he is known, is easyJet’s biggest shareholder with over a third of the stock and continues to publicly criticize the company’s management, including McCall’s 6.4 million pound total pay.

(Additional reporting by Vincent Flasseur; Editing by Erica Billingham)

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